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Monday, March 25

25th Mar - US Open

This is going to be a dull week - especially with the holidays approaching... Next week we have the ECB meeting and US payrolls. I "sense a disturbance in the force": market wisdom says buy the rumor, sell the fact. Not just because markets discount the news before the event, but also because the "news" tends to disappoint. The Cyprus has not been solved, and new trouble is coming toward us already.

This episode signals
that Germany and the other northern European countries are
no longer willing indefinitely to foot the bill alone. At the same time the
eurozone continues to lack the tools to deal with an acute crisis. This makes
change almost inevitable for the way the eurozone is governed. Some governments
have already called for a formal mechanism to allow a country to exit the euro.

Unlike in the case of Germany before monetary union, in the euro area, the
money multiplier only had some kind of stability for a short period between the
Autumn of 2005 and the Autumn of 2008. Before that it was affected by the
currency change-over, after that by the crisis.

Could the Cypriot
bailout and political gridlock in Italy throw Europe into turmoil once again? Simon Jacks speaks to
Emma Bonino, former vice-president of the Italian Senate, and Enrico Cucchiani,
chief executive of Intesa Sanpaolo,
Italy's biggest bank, about the prospect of
Europe-wide bank runs. One of the problems facing Italy is labour market stagnation.

I don’t expect to see
a wholesale, sudden rejection of the idea that money should be free to go
wherever it wants, whenever it wants. There may well, however, be a process of
erosion, as governments intervene to limit both the pace at which money comes in
and the rate at which it goes out.